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Flying rupee

Flying rupee

With foreign injection of dollars to the tune of $1.5 billion into the country’s forex reserves, the rupee has appreciated against dollar by almost 10 percent in recent days. This one step has decreased the country’s public debt by Rs700 to 800 billion in one go. Total foreign debt stood at $68 billion and ten percent depreciation of dollar against rupee decreased the debt burden.

The government has established Pakistan Development Fund (PDF) and requested to friendly countries for providing multibillion dollars support to Islamabad for executing mega development projects in years ahead. Finance Minister Ishaq Dar had told in his press briefing that Pakistan required $20 to $25 billion over the medium term to bridge its development gap.

So far, Kingdom of Saudi Arabia has come forward and provided $1.5 billion to Islamabad and government is claiming that some other countries will also contribute into this Fund keeping in view credibility being enjoyed by the incumbent government. There are expectations that another installment of $1.5 billion will be poured into the national kitty in months ahead which will further boost confidence of investors on macroeconomic stability of the country.

In the wake of generous foreign inflows, it resulted into sharp appreciation of rupee against dollar. The rupee has appreciated against dollar and stands at less than Rs100 against a US dollar in inter-bank and kerb market.

The country’s foreign currency reserves swelled up to $9.52 billion during last week and Finance Minister Ishaq Dar seems confident that the reserves would cross $10 billion till end March 2014. With expected approval of $540 million tranche by the IMF’s executive board probably on March 24 and subsequently its disbursement in next couple of days will pave the way for crossing the reserves up to $10 billion till March 31, 2014.

Now the government is eyeing to increase its foreign currency reserves up to $16 billion by end June of this financial year. This additional $6 billion into reserves will be ensured through $400 million reimbursement of Coalition Support Fund (CSF) from USA in April, launching of Eurobond to the tune of $500 million, auctioning of 3G and 4G license of at least $1.6 to $2 billion and restoration of program loans from the multilateral creditors such as the World Bank and Asian Development Bank to the tune of $1.5 billion. The Islamic Development Bank (IDB) will also provide $500 million to Pakistan in months ahead. The government is also making plans to launch Global Depository Receipts (GDRs) for OGDCL to the tune of $500 million coupled with accomplishing transaction of floating shares of some banks within next few months.

The foreign inflows in the pipeline need to be materialized in timely manner which will result in scaling up foreign currency reserves up to the desired level. The improved reserves position will not only boost confidence of the investors but will also pave the way for stabilizing the much needed exchange rate in years ahead which will be a positive sign for the national economy.